What is Fiscal Deficit? How it affect Policy rates?

It is the difference between the government’s total receipts (excluding borrowings) and total expenditure (ie)
If the Govt selling is more than the Govt's Income, the amount of money which is spend more is known as Fiscal Deficit.
Fiscal Deficit plays an important role during interim Budget calculation and influence the economy.
Based on the Fiscal deficit, Fiscal Policy is made.

What is mean by Fiscal Policy?
    
    It is the use of the Govt spending and revenue collection to influence the economy.
These Policies affect tax rates, Interest rates and Govt spending in an effort to Control the economy.
It is also an additional method to determine public revenue and public expenditure.

Fiscal Deficit is of two types.

1. Revenue Deficit.
2. Infrastructure Deficit.

What is Revenue Deficit?
   
     It states that, where the net amount received (by taxes and other forms), fails to meet the predicted net amount to be received by the Govt.
Revenue Deficit in the year 2009-10 is 4.8% of GDP.

What is Infrastructure Deficit?
    
     If the Govt spends money on infrastructure like building houses for Parliment members, Govt buildings, maintenance of existing buildings and its infrastructure that money comes under Infrastructure Deficit.

These deficit are overall calculated in a single term known as FISCAL DEFICIT.

Fiscal Deficit in the year 2009-10 is proposed to be 6.8% of GDP.
Fiscal Deficit in the current Financial year 2011-12 is proposed to be 5.2% of GDP.

RBI and GOVT regulates some Fiscal Policies to bring down the Fiscal Deficit.
This yr RBI indicated that Fiscal Deficit should be reduced to 4% in next yr and to 3% by 2016.

If the Fiscal Deficit is more the Stability and economy of a country is lowered, while If the Fiscal Deficit is less the Stability and economy of a country is high.
So Govt and RBI have a Special Eye in Monitoring Fiscal policies and Fiscal deficit.